House prices rise as RBA rate hike looms – realestate.com.au

Property prices rose modestly across Australia in January, although greater buyer choice ahead of a looming rate hike created softer conditions in the larger capital cities.

Australia’s average home value rose 0.2% last month, marking a steady start to the year ahead of the Reserve Bank’s first interest rate decision of 2026, according to the PropTrack Home Price Index.

The modest increase in the value of a typical Australian home in January came ahead of the RBA’s much-anticipated meeting in February, where the board is widely expected to raise interest rates for the first time in more than two years.

The increased likelihood of a rate hike comes after recent data from the Australian Bureau of Statistics showed inflation is rising faster than expected.

A rate hike would mark the end of the rate-cutting cycle, which has seen cash rates cut three times since February last year.

Falling interest rates helped drive home prices higher in 2025, with the national median home value rising 8.4% over the past twelve months.

Could an interest rate hike derail price growth?

REA Group senior economist Angus Moore said that despite the potential for a rate hike, several broad factors were still supporting property prices.

“Price growth in 2025 has been supported by three rate cuts, but a rate hike at the Reserve Bank’s February meeting now seems likely, with inflation in the second half of 2025 set to be stronger than expected,” he said.

“While the possibility of further increases may weigh on the market, unemployment remains very low, which will support demand.”

“At the same time, the supply of new homes remains limited, which supports house prices.”

How property prices changed in Australia in January

Price movements varied across the capitals in January, with Adelaide leading the way with a 0.9% increase and moderate increases in Brisbane (+0.4%) and Perth (+0.3%).

These cities have consistently recorded the strongest price growth of any capital in recent years, with demand for affordable housing outpacing the supply of housing on the market, pushing up values.

Values ​​in Perth are 17.5% higher than a year ago, while prices in Brisbane rose 14.4% and prices in Adelaide rose 13.8%.

Property prices in Darwin have risen by more than 14% in the past twelve months. Image: realestate.com.au/buy

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Darwin is now among the best performing capital cities in terms of price growth, with average house values ​​now 14.7% higher than a year ago, despite prices remaining flat in January.

A surge in investor demand for affordable housing has sparked a turnaround in Darwin’s market, with prices now at record highs.

Price pause and wider choice give buyers breathing space

It was a different story in Melbourne, Sydney and Canberra, where price growth was slower than in the other capitals.

Values ​​fell 0.1% in both Melbourne and Canberra, while prices rose 0.1% in Sydney.

Mr Moore said house price growth has recently slowed in Australia’s largest property markets, amid an increase in the number of homes coming onto the market.

“Sydney and Melbourne have seen house price growth slow in recent months,” he said.

“Melbourne has seen three months of modest declines, and although Sydney prices rose in January, they are below their recent peak.”

An increase in the number of new homes listed has given buyers in Sydney, Melbourne and Canberra more choice and dampened price growth. Photo: Getty

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There were more properties on the market for buyers to choose from in January, easing pressure on prices, Moore said.

“The ample choice for buyers in these cities throughout the spring likely contributed to the softer price growth,” he said.

“Brisbane, Perth and Adelaide, on the other hand, continued to see strong growth and outperformed the larger capital cities amid very limited buyer choice,” Moore said.

The latest REA Group Listings Report shows there was a 10.2% year-on-year increase in new listings in Melbourne, and an 11.9% increase in Sydney. New listings in Canberra were up almost 20%.

While the total number of homes on the market in the capital cities was lower than a year ago, the decline in the number of homes for sale was particularly acute in Darwin, with 38.2% fewer homes for sale than 12 months earlier.

Mr Moore said lower sales volumes in January made it harder to assess house price momentum, but gains were still expected in the coming year.

“Housing prices are still likely to reach new highs in 2026, but at a slower growth rate than in 2025,” he said.